Originally posted in The Financial Express on 1 February 2025
Many businesses limp for lack of working capital
Umpteen economic units and businesses, especially CMSMEs, across Bangladesh struggle to run for massive capital shortfalls as one-third of them have no access to easy loans, according to official statistics.
Some 34.41 per cent of the economic units across the country cannot access easy loan from any commercial banks and financial institutions, the Bangladesh Economic Census 2024 shows.
A total of 85.84 per cent of economic units or businesses suffer capital shortfall for expanding their business and economic activities, says the census report presented by Bangladesh Bureau of Statistics (BBS).
Meanwhile, in a truncated growth, Bangladesh’s economic units have expanded tremendously over the last 11 years mostly in services sector, far outstripping expansion of manufacturing sector.
Analysts say if the cottage, micro, small and medium enterprises (CMSMEs) are not formalised and not facilitated for getting loan and capital support, only small services units would not help Bangladesh become a higher-middle-income economy.
“If the government does not ensure access to loan for the economic units across the country, Bangladesh’s aspiration to become higher-middle-income country would remain a distant dream,” says one of them.
The latest economic census has tried to identify some problems of the economic units and businesses, including access to loan, availability of capital, raw materials, marketing channel, infrastructure, electricity and fuel supply, and increase in product cost during their business and economic activities.
For the first time has the national statistical agency added this ‘existing problem in business establishments’ component to the economic census to show how to strike a balance in the economy.
According to the economic census report 2024, some 6.47 million economic units out of the country’s total 13.42 million respondents have a problem of business capital while 2.59 million units have no access to finance.
Almost all the cottage, micro and small enterprises have not necessary formal documents for their spontaneous growth and informal operations, and this lacking kicked them out of access to the commercial banks and financial institutions.
The banks and financial institutions usually provide loans to the formal enterprises and business.
The preliminary report of the BBS economic census 2024 has shows that some 18.75 per cent of economic units are facing infrastructural problems in continuing their business.
“Some 9.77 per cent of the units have been facing the price-escalation problem in their business,” the report says.
Policy Exchange Bangladesh Chairman Dr Masrur Reaz says the rise of services sector has a positive impact on consumption. “But as the manufacturing-sector growth has fallen, it will affect employment.”
On the other hand, if the rising services-sector economic units have not been formalised, their access to funds and loans would be falling, which will ultimately affect the economy badly, he told the FE correspondent.
“The government as well as the commercial banks and financial institutions have big roles in formalising the CMSMEs and facilitate their business expansion,” says Dr Masrur.
Centre for Policy Dialogue (CPD) Research Director Dr KG Moazzem terms it a big policy failure of the government as the CMSMEs are not being formalised.
“The banks have the small loan and SME units across the country. But they usually do not want to provide loans to the cottage, micros and small businesses as most of them are informal. The banks rather lend to the medium and big industries,” he told the FE
“Interestingly, all the governments as well as the commercial banks have also failed to make those small and medium enterprises bankable.”
The policy researcher also alerts that if those economic units are not facilitated for vertical expansion and if the country waits only for horizontal expansion of the economic units, Bangladesh would not be able to graduate to a high-income country.